Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held EnerDynamic Hybrid Technologies Corp. (CVE:EHT) for five years would be nursing their metaphorical wounds since the share price dropped 97% in that time. And we doubt long term believers are the only worried holders, since the stock price has declined 50% over the last twelve months.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
EnerDynamic Hybrid Technologies recorded just CA$400,519 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). Investors will be hoping that EnerDynamic Hybrid Technologies can make progress and gain better traction for the business, before it runs low on cash.
We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. EnerDynamic Hybrid Technologies has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that EnerDynamic Hybrid Technologies had CA$27m more in total liabilities than it had cash, when it last reported in May 2019. That puts it in the highest risk category, according to our analysis. But with the share price diving 52% per year, over 5 years , it's probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how EnerDynamic Hybrid Technologies's cash levels have changed over time (click to see the values). The image below shows how EnerDynamic Hybrid Technologies's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.
A Different Perspective
Investors in EnerDynamic Hybrid Technologies had a tough year, with a total loss of 50%, against a market gain of about 3.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 52% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
EnerDynamic Hybrid Technologies is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.